For Purchasers and their Agents
This page was prepared to be an informative guide when considering or actually writing an offer on a "Bank Owned" (otherwise known as an REO or "Corporate-Owned") property. It is not intended to be a binding agreement of any sort. The information contained herein is designed to create an informed consumer and to lessen the stress of the home buying process for the Purchaser, Buyer's Agent, and Listing Agent.
Please feel free to contact us with additional questions or concerns. We look forward to working with you!
Q. What does it mean that this property is a bank owned home and sold "AS-IS"?
- When a property is being sold "as-is" no repairs will be made by seller. If an inspection contingency is included in the offer, any response should only include any major structural or safety issues over $500 and should include a possible credit amount at closing, along with 2 contractor bids. There are no guarantees that any allowance will be given. The properties are already priced assuming repairs are needed. In this situation, the seller is not agreeing to make any repairs nor is willing to lower the price for repairs needed on the property. If the property is sold "AS-IS" and no repairs or refurbishments have been made - it should be assumed that some work of some type is needed and the offer should be reflective of this information. The client realizes that work needs to be done and has already priced the property accordingly. Special Notes: Banks will not accept any contingency on the sale of a buyer's home. Sellers will not pay for Home Warranties. Please understand that most of our houses do not qualify for all forms of financing - especially FHA.
Q. Will you provide the lockbox combo so I can inspect when I am in the area?
- Buyers are not allowed in the property without the agent present. We have plenty of Associates available to meet you to show the property. You may request a showing by clicking here.
Q. How does the process of making an offer work with a bank owned property? Do you propose the offer to the lender and they accept, decline or make a counter offer?
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We submit the offer like any other property. The bank usually has a threshold of what they can accept based on multiple valuations they have on hand. That price is discounted by the days on market…the longer on market the lower they can accept. They will counter offer unless they consider the offer ridiculous. One mandatory item is that you must have a satisfactory proof of funds.
The bank will require that all offers be submitted to them on a summary form which is called the "Offer Worksheet." This is aimed at simplifying the process for the Asset Manager, who will more often than not, have a large number of properties under management and often in multiple States with vastly different real estate contracts. This worksheet will have the "basics" only (Price, Terms, Concessions, Closing dates, etc.). The Wilmoth Group prepares this "Offer Worksheet" based from the terms of the purchase agreement we receive.
Since all offers are submitted to the seller on the worksheet (or online via the "Offer Summary") your counter offer may come back in the "worksheet" format (Simple details of what the bank is willing to accept) or via an unsigned Counter Offer. The Wilmoth Group will respond back to you either verbally or via a counter offer form. Users of the "Make An Offer" system will receive an acceptance, counter offer, or rejection through the system.
Offers by "Letter of Intent" will not be accepted.
Q. When I make an offer, how long does it take to receive an answer?
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Sellers may take up to 7 - 10 days to respond to submitted contracts. Please allow extra response time for the seller to respond to offers. Your offer will be timely submitted. If you have not heard a response by your expiration date and time, we are not ignoring your requests --we simply do not have an answer from the bank. Each Asset Manager representing the corporate owner works with hundreds of properties at any given time and they try to respond timely, but unfortunately, this cannot always be done. As soon as we have a response, we will promptly forward it on to you.
We have no control over the bank's decision making process. On rare occasion they will respond in the first 48 hours. However, more than likely they will respond in 3 to 5 days. Please be patient and do not call to check on progress. The Wilmoth Group will notify you immediately when we receive a response. Some banks do not look at offers until the property has been on the market for 5 to 10 days. Please be considerate, we are all working towards the common goal of closing on the subject property. IF YOU HAVE NOT HEARD FROM US IT IS BECAUSE WE HAVE NO UPDATE TO GIVE YOU- NOT BECAUSE WE ARE IGNORING YOU.
Q. Will I get an answer to my offer over the weekend?
- No-unless we are processing responses received on a Friday afternoon. The seller's representatives work normal five day a week schedules and are not available over the weekend. Any offer submitted over the weekend will be presented the following business day. Any offer submitted through the "Make An Offer" system will be date stamped. The bank will know when you submitted your offer.
Q. It looks like the seller did not sign the counter offer?
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You may receive a Seller's Counter Offer with no signatures. These forms are generated by the bank's Asset Manager or the outsource company (and often come to the Listing agent as an email attachment). Once an offer is accepted the entire "package" (which may include the Offer as well as Counters, Addendums, copy of the check, et.al.) is sent to the bank for signatures.
Once you are informed that your offer is accepted, it is. (acceptance may be accompanied by the afore mentioned worksheet). REO departments and Asset managers give the "ok" and then go to their managers for signatures. (It is highly unlikely to have an Asset Manager "unaccept" an accepted offer. Yes, you could be the first, but it is highly unlikely.) We realize it is an unusual business practice to agree to offers orally, but the banks have their own way of doing business and we appreciate your understanding.
Q. What is this Bank Addendum all about?
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Almost all corporate owned properties require an additional document be executed known as the "Addendum". This document is in addition to the signed Purchase Agreement and any counter offers. It carries additional terms unique to purchasing a corporate owned property. Do not "just sign" this Addendum-read it and understand what you are agreeing to. Most Addendums are highly in favor of the Seller - they try to cover many loopholes that have been exploited across the country. In some cases the Purchase Contract may be retyped on required bank forms.
Addendums typically carry a charge per diem if the property does not close by the agreed upon close date, if the fault is to the buyer/lender.
No changes are allowed to the seller's addendum. ALL CONTRACTS ARE SUBJECT TO MANAGEMENT APPROVAL.
Q. How much earnest money must be submitted?
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A minimum of $1,000 earnest money deposit (EMD) is required on all offers for properties listed over $50,000, some banks may require more. Under $50,000 requires a $500 EMD. Also, a minimum of 10% is required for cash purchases.
All Earnest Money Deposits must be in the form of a Cashiers Check or Money Order.
Q. I am a Realtor... what is the process for submitting an offer and what else do I need to know?
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**As Is**This is a bank owned property and is being sold in "As Is" condition. Please make sure that your buyer understands this. The bank acquired the property through foreclosure proceedings and does not have prior history or information regarding the condition of the property. There is no Sales Disclosure. Most banks have no inspections done on these properties. These properties have already been priced assuming that repairs are needed. FHA or VA financing will not typically work on these properties-with the exception of rehabbed properties that will be so noted in the MLS.
**Submitting an Offer**When submitting an offer, please include proof of funds or preapproval letter stating amount that buyer is qualified for. When we submit your offer to the bank, we are also communicating buyer's ability to purchase the property. Your offer will not be submitted without proof of funds or preapproval. When your complete offer is received, we will fax you a confirmation of receipt. It is important that you submit cover sheet w/contact information. Your offer will be submitted to the bank in a timely fashion and you should expect a response within 48 business hours.
**Offer Process**After you have submitted on offer, one option the seller may choose is to counter your offer. We will submit this counter to you on standard Realtor forms. It is not uncommon for another offer to come in during negotiation. If this happens, bank will call for "Highest and Best" on all submitted offers. Sometimes the bank will accept an offer, reject the others and occasionally they will choose to counter only one of the offers.
**Accepted Offer**Once your offer has been accepted, you will receive the banks addendum which is unique to the negotiated transaction and supercedes the Purchase Agreement (PA). Each bank uses their own addendum and there will be multiple places for the buyer to sign and initial. Please review carefully with your buyer.
**Terms of Acceptance**Bank addendum will specify the negotiated terms, disclosures and contract date. Please make sure that your buyer understands these terms. The addendum also stipulates a per diem penalty if buyer does not close by "contract date". If there is a lender involved, please make sure that the lender is aware of this date. The banks will enforce the per diem if buyer cannot close for any reason including "lender not being ready". Time is of the essence, which is why we require original signed docs back in 48 hrs. Earnest money needs to be in the form of a cashiers check or certified check, no exceptions. Some banks have preliminary title work completed, others start the title process only with a fully executed package.
**Inspections**Property is being sold in "As Is" condition. If an inspection contingency is included in PA, responses should only address major structural or safety issues. The Bank will seldom make any repairs and will only occasionally grant an allowance at closing. The buyer is welcome to have an inspection done for informational purposes. We will have utilities turned on to accommodate the inspection. However, if property has to be "de-winterized" for the purposes of an inspection, buyer will be required to sign an addendum stating "If buyer does not close on property, for any reason, buyer will be responsible for the cost of having property re-winterized by Seller approved vendor"
**Other Info** HOA information is not typically available. If we have, we will be happy to provide. Buyer will not be granted access to property for repairs of any nature prior to close. Buyer should plan on having a locksmith available to rekey immediately after closing. Lockbox and sign will be removed shortly after closing. Please ask buyer to leave both in place and they will be removed.
Commission may be reduced due to any buyer concessions.
Seller may not pay a selling commission to a selling agent purchasing a property for themselves . Please confirm, and do not assume, to find out if this applies to your transaction.
Q. What form do I use to make an offer?
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Realtors-Please use your local state REALTOR approved Purchase Agreement form.
Buyers Not Represented By a Realtor-sign up to join our community at our web site. Then use our "Make An Offer" system. It is simple and fast. Convenient also!
Q. Will a cash offer be looked at favorably?
- Cash offers are normally looked upon more favorably than financed offers. Therefore, the banks normally frown upon trying to change to financing. They will not allow mortgage companies or private lenders to be included on the HUD settlement statement if the accepted purchase offer stated "cash" terms. Cash "AS-IS" offers are not contingent upon having the funds available to close or the condition of the property. The buyer should be fully informed that (at a minimum) Earnest Money will be forfeited if they do not close the property. Selling institutions do not consider credit lines to be a form of cash. Credit lines are conventional loans.
Q. Why do I have to provide a Proof of Funds or a Pre-Approval?
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As a standard rule, purchasing bank-owned properties requires making available with your offer documentation that the purchaser either has the funds or is approved for bank financing. When a buyer submits this information with their offer, and their offer is accepted, in general is eliminates the financing contingency of the purchase agreement. Why? Because the point of the requirement is to prove to the seller that the proposed purchaser does not face any problems on completing the purchase-they either have funds or a mortgage pre-approval in place.
When the proof of funds is provided as cash, then the method for purchasing the property needs to be cash. Please do not come back after the offer is accepted and let us know that your buyer now wants to use financing. If you are the buyer, or the agent representing that buyer, if this occurs please be aware that the seller may choose to cancel the purchase agreement and retain the earnest money due to non-performance under the terms of the accepted contract.
If you submit a pre-approval and it has a lot of contingencies, or it is very sketchy as to how much of an approval it really is, please be aware that the seller may choose to accept an offer that provides a more solid proof of funds. About the only thing that can cancel an agreement that has been accepted with the type of proof of funds required, is a low appraisal. With bank-owned properties, that is extremely rare since in general they are being purchased at a discount.
Contract and lender letters MUST specify the type of loan and the LTV the borrower is seeking.
Q. Why are some sellers requiring "pre-approval" from their lending divisions? Do I have to do that?
- Some Bank Sellers are starting to request buyers to get pre-approvals from their own lending institution. They are having many transactions fall apart due to buyer credit issues. All offers accompanied by a pre-approval will be presented regardless of the source of the pre-approval; however, it is up to seller as to how they view the pre-approvals. Some will reject your offer if their lending areas have not reviewed and issued a pre-approval. We recommend you play the game by their rules.
Q. How can I make sure my offer is received?
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Realtors-You will receive a fax confirmation within 24 hours of submitting your offer.
Buyers Not Represented By a Realtor- You will receive an email confirmation
Multiple offers normally result in a request for a highest and best offer. Escalation clauses will not be accepted by the banks.
Q. Will you give me some idea of time frames?
- Generally you will have 30 (to 45) days from mutual acceptance to close the transaction. Often the proposed closing date on the original offer is unrealistic due to the elongated negotiation and acceptance process with the REO departments. The Asset Manager knows that you can't close in a week and a half (unless your offer is cash). They are not here to work against you, Asset managers know that appraisals, inspections and the loan process take time. They will assume that you have taken the time prior to making an offer to become pre-approved for the loan and that there will be no trivial delays beyond the 30 (to 45) day closing period. Read the Bank Addendum carefully – there is often a per diem late fee assessed for tardy closings. The bank will not suffer delays due to the Purchaser's Lender not performing in a timely manner. Begin your inspections upon being alerted that your offer is accepted.
Q. Can the buyer do an inspection?
- Just like any other sale, your buyer has the right to fully inspect the property within the frame of the inspection contingency of the purchase agreement. Seller will not order or pay for any inspections.
Q. How do we set up inspections?
- It is absolutely essential that you give us 3 BUSINESS DAYS NOTICE PRIOR to scheduling your inspection. Some utilities (such as electricity) will likely be on prior to your making an offer, others will not (such as gas or propane) The Listing Agent has NO control over the work schedules of the local utility companies. As such the Listing Agent will not be responsible for re-inspections and/or associated fees. It is not a bad idea to visit the property a day PRIOR to the inspection to check if systems are on and working.
Q. How do I get the utilities on in a property I am interested in?
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Any inspection requested by the buyer is intended to be only for buyer's information. We will have utilities turned on to accommodate the inspection. However, if property has to be "de-winterized" for the purposes of an inspection, buyer will be required to sign an addendum stating "If buyer does not close on property, for any reason, buyer will be responsible for the cost of having property re-winterized by Seller approved vendor" Utilities will be turned on if safe to do so. Depending on the timing of the winterization, it is quite possible that plumbing repairs will be needed and the water may not be able to be turned on. Please keep these factors in mind when making their offer. If an inspector/appraiser is unwilling to turn on pilot lights, main water valve, etc., it is the buyer or buyer's agent responsibility to make arrangements to have them turned on and off again.
Electricity will be turned off as of the day of closing; please make arrangements to have utilities transferred to the buyer.
Q. Can the buyer cancel if they find something wrong?
- The buyer has the right to cancel the contract and receive their deposit back if they do so within their contractual time frame (unless specifically noted).
Q. Will the bank pay for any repairs?
- Please understand that this home is being sold "AS-IS." If the bank has rehabilitated the home, their scope of work has already been determined and can not be changed. As a rule, ONLY issues which are LENDER REQUIRED will be addressed. REO Asset Managers are VERY familiar with what constitutes a Lender Required repair and will not approve "cosmetic," "dated", or "wear and tear" related issues.
Q. How strict is the seller with contingency periods?
- The buyer must adhere strictly to the contingency periods or they risk having their contract canceled and losing their deposit. This is a business transaction and banks don't like excuses or delayed decision making.
Q. Will the owner accept contingent sales?
- It is highly unlikely that any bank would accept a contingent sale. If the bank accepts your offer then finds out that the buyer really does need to sell a home in order to purchase (and you haven't disclosed that) the sale will be immediately cancelled. Don't expect to have the earnest money returned in this type of situation.
Q. Do you have any information on a Home Owners Association?
- If this is a bank-owned property, Home Owners information is not routinely provided. However, if we have information, we will gladly provide it as well as any contact information if available.
Q. What happens if there are multiple offers for a property?
- If bank receives multiple offers on a property, buyers may be requested to submit their highest, best and final offer by an agreed upon date and time. This is fairly common.
Q. Can I take possession before the closing in order to start making repairs?
- Due to liability risks, the Purchaser is not to take possession until Seller has been funded (closing is final). No repairs to be performed by the Purchaser prior to this time.
Q. What happens with Board of Health fees, unpaid taxes, and sewer liens?
- Local Boards of Health do not always timely file liens on properties. The title insurance only covers recorded liens. The title company will make all efforts possible to identify any liens that could cloud the Title. These charges will be paid at closing in order to provide clear title at the date of closing. It is in the interest of your buyer to check with the local Board of Health to make sure there are no outstanding bills that have not yet been recorded. This is the same with sewer liens. Also, if the subject property is a newer build, it is in the interest of you buyer to check if the assessed taxes are correct. Notify the Title Company with written records of any pertinent information.
Q. Who chooses the title company?
- Like it or not, the bank chooses. Period. (the Listing Agent has no say in the matter either - we have our favorite Title companies too, so we are all in the same boat.) This is due to the fact that they have significant amounts of Title work done during the Foreclosure process. TITLE COMPANY CONTACT INFORMATION COMES WITH THE SIGNED DOCUMENTS FROM THE SELLER. In all likelihood the Listing Agent WILL NOT HAVE this information prior to receiving this document package. We are waiting too and will forward the information as soon as it becomes available. Continued multiple and/or daily queries slow down the process for everyone involved. Please be considerate, we are all working towards the common goal of closing on the subject property.
Q. Can I assign the purchase contract after it is accepted?
- No - Sellers do not allow assignments of contracts.
Q. Will I be provided with keys after the closing?
- All properties are mastered keyed and buyers are advised to change locks after closing. Buyer should plan on having a locksmith available to rekey immediately after closing. The lockbox will be removed shortly after closing. Please leave it in place and it will be removed. The buyer will not be given one of the master keys at closing as we do not condone using for access since there are many properties that utilize the same key. A locksmith should be budgeted for and immediately scheduled.